Is Tim Hortons Inc. (USA) (NYSE:THI) a buy, sell, or hold? The best stock pickers are turning less bullish. The number of bullish hedge fund positions stayed the same which is a slightly negative development in our experience
To most traders, hedge funds are seen as underperforming, old investment vehicles of the past. While there are greater than 8000 funds with their doors open at the moment, we hone in on the elite of this group, about 450 funds. It is estimated that this group has its hands on the majority of the smart money's total asset base, and by tracking their best stock picks, we have deciphered a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we've began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (see the details here).
Just as important, bullish insider trading sentiment is a second way to parse down the world of equities. Just as you'd expect, there are a number of incentives for an upper level exec to drop shares of his or her company, but just one, very clear reason why they would behave bullishly. Plenty of empirical studies have demonstrated the market-beating potential of this tactic if you know what to do (learn more here).
With all of this in mind, we're going to take a look at the recent action surrounding Tim Hortons Inc. (USA) (NYSE:THI).
Heading into Q2, a total of 11 of the hedge funds we track were bullish in this stock, a change of 0% from the first quarter. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly.
According to our comprehensive database, Highfields Capital Management, managed by Jonathon Jacobson, holds the biggest position in Tim Hortons Inc. (USA) (NYSE:THI). Highfields Capital Management has a $330.5 million position in the stock, comprising 3% of its 13F portfolio. On Highfields Capital Management's heels is Luxor Capital Group, managed by Christian Leone, which held a $153.5 million position; the fund has 2.9% of its 13F portfolio invested in the stock. Some other hedgies with similar optimism include James Crichton and Adam Weiss's Scout Capital Management, Frank Brosens's Taconic Capital and Jim Simons's Renaissance Technologies.
Due to the fact that Tim Hortons Inc. (USA) (NYSE:THI) has faced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there were a few money managers who sold off their positions entirely heading into Q2. Intriguingly, Glenn Russell Dubin's Highbridge Capital Management sold off the biggest investment of the "upper crust" of funds we watch, valued at close to $0.6 million in stock., and Matthew Tewksbury of Stevens Capital Management was right behind this move, as the fund cut about $0.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Bullish insider trading is best served when the company in question has seen transactions within the past six months. Over the last six-month time period, Tim Hortons Inc. (USA) (NYSE:THI) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
Let's go over hedge fund and insider activity in other stocks similar to Tim Hortons Inc. (USA) (NYSE:THI). These stocks are Domino's Pizza, Inc. (NYSE:DPZ), Dunkin Brands Group Inc (NASDAQ:DNKN), Darden Restaurants, Inc. (NYSE:DRI), Burger King Worldwide Inc (NYSE:BKW), and Chipotle Mexican Grill, Inc. (NYSE:CMG). This group of stocks are in the restaurants industry and their market caps are similar to THI's market cap.